Wednesday, April 11, 2018

"Spotlight: Rio Tinto and the World’s First 'Intelligent' Mine" (RIO;

Look mom, No cab!

From Knowledge Leaders Capital:

Later this year, Rio Tinto will seek board approval to spend $2.2B to
build the world’s first “intelligent” mine, a network of robots and
autonomous vehicles all working together on the site of the earth’s
largest iron ore complex in Western Australia. Whether or not the
project is approved, the firm already is 10 years ahead of rivals in
autonomous technology, the firm’s CEO told the Economist in a recent article.

In our research on Knowledge Leaders, a $2.2B commitment to the
future is the type of measurable investment that stands out. That’s
because the first step in our investment process is to capitalize
intangible investments. We adjust a company’s financial history so that
investments in the future – $2.2B in R&D, for example – doesn’t just
get expensed and disappear from the financial record, rather it counts
as an asset. This way, when we get to the next step – a quantitative
screen for Knowledge Leaders – companies with intangible assets such
as, say, the world’s first intelligent mine, will rise to the top.

A hallmark of a Knowledge Leader firm is industry leadership through
advances that other companies (Knowledge Followers) then mimic in effort
to compete. Indeed, a consistent theme in Rio Tinto’s reported
strategic priorities is “breaking new ground in the industry … to
deliver faster and better processes, cleaner and greener outcomes.” At
Rio Tinto, this is executed by the firm’s 47,000 employees via the use
of automated trucks and trains, remote operated drills and drones, and
exploration via 3D modeling, to name a few of the tools evaluated and
deployed by the firm’s Growth & Innovation group.

The site of the first intelligent mine and Rio Tinto’s most visible
(and expensive) innovations is Pilbara, Western Australia, a complex of
16 iron ore mines, plants and distribution centers. Already at work on
the ground is “AutoHaul,” a fully autonomous, high-speed, long-distance
rail system, in addition to a new fleet of autonomous Komatsu trucks.
Komatsu, by the way is another Knowledge Leader company investing in its
future growth. In this case, Komatsu also has partnered with Rio Tinto
to retrofit existing trucks in the direction of full autonomy.

Iron Ore, which accounts for about two-thirds of Rio Tinto’s
earnings, is the home of the firm’s greatest investments in innovation,
with the expectation that these advancements eventually will trickle
down to other groups much like breakthroughs from NASA’s Space Program –
memory foam, cordless power tools, lithium ion batteries in our phones —
trickled down to life on earth.

Speaking of lithium, at the moment, it makes up only a fraction of
Rio Tinto’s assets, and management seems to exhibit restraint while
discussing it. The firm’s one lithium project is located in Serbia,
where geologists discovered a deposit of the mineral “jadarite” in 2004.
Interestingly, jadarite has almost the same chemical composition as the
fictional kryptonite of Superman fame. The site is now in the
prefeasibility stage to assess viability for mining both lithium
(rechargeable batteries) and borates (wind turbines). Jadar is a
frontier project in the firm’s Energy and Materials group, which had
revenues of $7.7B in 2017. The Iron Ore group brought in $18B, Aluminum
$11B, and Copper and Diamonds $4.8B....MORE